Meat Industry Association Media Release

Chairman’s Address to the Annual General Meeting
Wairakei, 11-12 September, 2005

Members of the Association, Ladies and Gentlemen

You have all received the Annual Report of the Association, including the financial statements for the year ended 30 June 2005, providing a full report on the current situation of the industry, and the work that has been undertaken by the Association over the past year for members.

I recommend that you do more than browse the report, not least to remind yourselves of the wide diversity of matters in which the Association’s staff are involved on your behalf – border security, a raft of employment relations issues, injury prevention matters, climate change policy, the national rail strategy – to mention a few.

We should remind ourselves that the Association was formed to enable members to do those things where collective action would be more effective than companies acting on their own – and note just how many of them there are.

This afternoon I want to focus on a just a few major issues.

First, though, may I observe that from a trading point of view, the year has been OK, but just OK. While prices received for meat products over the past year have shown modest gains in some areas, the commodity boom, which commentators seemed to regard as a feature of the world economy in recent years has waned, margins have been tight, and the rising costs of doing business in New Zealand have meant that for most of our members year end results have not or are not expected to exceed the highs of previous years.

Looking at highlights over the past year, I mention first the excellent relations which have developed with the New Zealand Food Safety Authority, and the stirling work the authority has been doing in dealing with access problems our products have encountered in certain new markets. Their work in China is a case in point. Their assistance in the recent issues which have arisen in relation to the de-registration of plants by the Malaysian authorities is another.

It is interesting that in contrast to the last few decades where the focus of our attention on access conditions for meat has been the regimes of the European Union and the United States, it is the regimes of our newer and smaller markets which now occupy most time, and it is reassuring to know that New Zealand’s officials are ready for this challenge.

I should also mention the very constructive tone which has characterized the Industry/NZFSA Ad Hoc Strategic Steering Group established last year. The group meets only as required, and carries none of the bureaucracy of standing bodies. The high level of those involved from the industry and NZFSA has given a sharp focus to the Group’s work.

And I would like to mention the excellent training framework being developed through the NZITO, and in particular the “Straight 2 Work/Jobs Jolt Partnership Agreement completed during the year between MIA, NZITO and the Ministry for Social Development which provides pre-employment training for people taken from the registered unemployed.

Turning to issues which are more unfinished business, we have to record that the industry failed, as did business generally, to turn the government away from most of its intended changes to employment legislation, ultimately implemented through the Holidays Act and the Employment Relations Reform Act.

If there is a change of government some of these matters may be able to be revisited, but in the meantime the industry as to instigate ways of managing the leeway the Holidays Act provides for abuse of leave provisions, and for the payment of penal rates while on leave.

Although our industry is technologically advanced and capital intensive, it is still highly dependant on its work force and we have to recognize that difficulties of recruiting in provincial areas, together with increasing employment costs may make the option of having the final stages of processing conducted offshore increasingly attractive to the industry.

It would be tragic if the value added end of our business was to move offshore, and it is to be hoped that management practices and industrial cooperation can be engendered which will avoid this outcome.

Another area in which we have failed to make headway with the government is with consultation processes on the recovery of costs of the services we receive from the various government agencies, and in particular on the recovery of certain overhead costs within MAF’s head office.

The Association has always accepted that the direct costs of the services of NZFSA and Asure should be recovered.

MAF Head Office costs however, are a different matter. These are costs which all taxpayers should bear as the cost of running the government’s administration, and should not be recoverable unless they can be directly related to the services being provided. More particularly our challenges to the proposed recovery have shown up that the consultation processes on these costs are really explanation processes.

Before the consultations commence, the Department will have gained cabinet approval to its proposed budgets on the basis that certain costs will be recovered from industry, so there is really no chance of the consultations resulting in the approved amounts being changed, or of any accountability for the costs involved to those who are being paying. In effect the industry is presented with a fait accompli, and that has been the attitude taken by MAF in the discussions.

The issue runs wider than MAF and the Meat Industry, but to make any progress we would have to reverse the whole process of government budgeting so that Cabinet approval were only given after the amounts to be recovered from industry had been agreed with industry. This will be a long haul, and I can’t see any shade of government wanting to speed it up.

The media has been full of the discussions we have had with Malaysia on the de-regulation of a large number of New Zealand processing establishments because of a perception that New Zealand’s halal processes do not comply with Malaysian interpretations of the Sharia.

Technically this is not a food safety matter, as it is essentially an interpretation of a religious law which is at issue, and where the advice from the Islam scholars our agencies have engaged, and which is accepted in all of our halal markets except Malaysia, differs from the rulings in Malaysia.

This will require some careful engagement to resolve, and may take some time. I am pleased to advise that all of the relevant New Zealand government agencies have been most supportive.

I have to note that the WTO’s Doha Round of multilateral trade negotiations has thus far failed to fire. This has led to a wide ranging response from member countries to conclude bi-lateral and sub-regional trade agreements, and New Zealand is well to the forefront in this process.

The association takes the view however, first, that the government should continue to advocate a continuation by the WTO of the multilateral process, which has served us well in the past; and secondly, that in setting its priorities for bilateral accords, it concentrate on those countries with whom we currently have strong trade interests, such as the United States and Japan, and where we are at risk from the conclusion of bilateral arrangements by others.

We are one week out from the election. Curiously, I am not conscious of the issues that concern the industry, or indeed business generally, being prominent in electioneering, which seems to be very personality orientated

It seems that if there were to be a change in government the proposed carbon tax would not proceed, but it is not clear how the overall question of managing global warming under the Kyoto Protocol would be pursued, and as with many other policy areas, we shall have to wait and see.

And it appears that there would be some readjustment to the employment legislation – though, perhaps not in the areas of concern to our industry.

If there is no change in government, it will be business as usual, but we should not assume that the demand for increased government spending across the board will abate, or that there will not be further changes to the employment legislation.

Whatever the outcome, the immediate economic outlook is tight. The recent oil price increases have only exacerbated already rising costs of doing business, and a steadying if not decline in consumption. None of the parties contesting the election has really cared to admit this, or said how they will manage in a constrained economy.

We for our part have to be smart, and not wait for governments to turn the economy, but anticipate how we will manage costs so as to get our products to market competitively and profitably.

The Association’s role is to facilitate collective action within the industry where this is most appropriate, to foresee trends, and to encourage government action. I am sure that the incoming Council will take up this challenge.

W J Falconer
Chairman
Meat Industry Association of New Zealand (Inc)